How do I Determine if I have to pay the apprenticeship Levy?
The introduction of the Apprenticeship Levy has changed how apprenticeships are funded. The levy is a payroll tax on UK employers to fund new apprenticeships opportunities within an organisation. If your company has an annual pay bill of more than £3 million, you will be paying the Apprenticeship Levy. If your business as a wage bill of under £3 million than your apprenticeship programmes would be supported, and at the very least part funded, via the Education and Skills Funding Agency. If your business’s annual wage bill is under £3 million, please click on this link to be directed for information on how non-levy funding would affect your business.
Key facts for Levy paying businesses:
•You will only pay the levy if your annual pay bill exceeds £3 million.
•The levy is set at 0.5% of your annual pay bill.
•You will have a levy allowance of £15,000 per year to offset against the levy.
•You can only use the levy to pay for apprenticeship training.
•Once you begin to pay the levy you have 24 months to use this funding to pay for apprenticeship training before it expires.
•To access to your levy pot, you would need to register with the Digital Apprenticeship Service ((DAS)- can we provide a link here to the DAS page).
An Example of how your funds are calculated:
An employer with 250 employees, each with a salary of £28,000
Pay bill: 250 x £28,000= £7,000,000
Levy sum: 0.5% x £7,000,000/100= £35,000
Subtract Levy allowance: £35,000 -£15,000= £20,000 ANNUAL LEVY PAYMENT
Can I use my apprenticeship levy funds for other purposes?
Currently, you can only use your apprenticeship levy funds to pay for apprenticeship training for apprentices that work at least 50% of the time in England. Each apprenticeship is allocated a maximum funding band, meaning you can only use your funds up to this band.
If the costs of training go over the maximum funding band for that apprenticeship, you will need to pay the difference with funds in your own budget that sits outside the apprenticeship levy. Prior to the apprentice starting, we would agree costs to ensure that you can plan your levy budget effectively.
You can’t use funds in your account to pay for other costs associated with your apprentices (such as wages, statutory licences to practise, travel and subsidiary costs, work placement programmes or the setting up of an apprenticeship programme).
For more information, please visit gov.uk to access the full apprenticeship funding rules guidance.
Can I share my funds with other businesses?
If you are in a group of companies paying the levy together, your group can already set up a single shared apprenticeship account and pool your funds. Read more about how to register connected organisations.
As a Levy payer, you may choose to support apprenticeships in other organisations by transferring a some of your apprenticeship funds to other employers. From April 2024, the proportion of funds that levy-paying employers can transfer to other businesses will increase to 50%. These funds can be transferred to any employer you wish, which can include employers within your supply chain, and Apprenticeship Training Agencies (ATAs), to support new opportunities and widen participation in apprenticeships. To see your organisation’s annual transfer allowance please visit your digital apprenticeship service account.
For more information on how you can spend your apprenticeship levy funding, please visit gov.uk changes to apprenticeship funding system.
How do the funds enter my account, and can they expire?
Funds show in your apprenticeship service account on the 23rd day of each month.
The amount of funding entering your account each month is calculated as follows:
• the levy you declare to HMRC through the PAYE process
• multiplied by the proportion of your bill paid to your workforce who live in England
• plus a 10% government top-up on this amount
When you add a PAYE scheme to your account, any backdated levy funds will be added to your account.
Current funds will be backdated to April 2017 when the apprenticeship levy started, after which funds will be backdated for a maximum of 24 months.
Funds you don’t use will expire 24 months after they enter your account. For example, funds entering your account in January 2025 will expire in January 2027.
Payments from your account to your training provider always use the oldest funds first.
For more information read the apprenticeship technical funding guide. Or contact us on 020 3764 4333 .
Are there any grants/incentives that I can receive?
Yes, there are multiple incentives that you may be eligible to receive if the apprentice and your business meets the criteria.
Every employer can receive an incentive of £1000 if they take on an apprentice aged 16-18 or an apprentice who is 19-24 with an Education Health Care Plan or a care leaver. You receive the first £500 payment at 3 months into the apprenticeship, with the final payment of £500 received at 12 months into the programme.
